P. JAGANMOHAN REDDY C.J. - The Income-tax Appellate Tribunal under section 26(1) of the Gift-tax Act, 1958, hereinafter to be referred to as the Act, has referred the following question, viz. :
'Whether the gifts in question are liable to be taxed under the Gift-tax Act ?'
The statement of the case discloses that the assessee (respondent) is a Hindu undivided family consisting of two brothers, P. Hanumanthappa and Sanjeevappa, who have made certain gifts of immovable properties in favor of their respective sons, some of whom were minors in the year of assessment, i.e., 1958-59, for which the previous year is the year ended March 31, 1958. The two brothers purported to have made the said gifts by executing four deeds of gift in favour of their sons. In the return filed by them, in answer to a notice issued under section 13(2) of the Act it was stated by the assessee that the gifts were inoperative having been made by the father to his sons. thereafter, a notice under section 15(2) of the Act was issued but as the assessee did not appear, the Gift-tax Officer completed the assessment under section 15(5) of the Act, and assessed them on those gifts.
Before the Appellate Assistant Commissioner it was contended that the gifts were invalid, inasmuch as there was no legal validity and further that they were exempt from the provision of the Act. The Appellate Assistant Commissioner rejected these contentions and confirmed the assessment holding that the gifts were voidable and as nobody had challenged the gifts it cannot be argued by the representative that they are invalid.
The Appellate Tribunal in appeal, however, reversed these findings holding that a member of a joint family cannot make a gift of the property to any one, much less coparceners. Following a passage in Mullas Hindu Law (12the edition) what they have said is a follows :
'The karta and his younger brother, the only members of the Hindu undivided family have made these gifts. It is well settled that a Hindu father in a Mitakshara family has no right to deal with his sons interest and properties, not even by way of family arrangement in a manner which alters the ordinary devolution of properties under the Hindu law.'
The learned advocate for the department is unable to dispel the basis of the Tribunals order. It is an elementary proposition that a karta of a Hindu undivided family cannot gift or alienate property except to the extent recognised under the Hindu law, namely, for legal necessity or for pious purposes or in favour of female members of the family so as long as the property is of a reasonable extent. Further, the partition of a joint family property does not involve transfer, which is one of the essential ingredients of a gift. That partition of a joint family does not involve a transfer is now well settled by their Lordships of the Supreme Court in Commissioner of Income-tax v. Keshavlal Lallubhai Patel, wherein it was laid down that the word 'transfer' was used in section 16(3)(a) (iii) and (iv) of the Income-tax Act in the strict sense and not in the sense of including every means by which property may be passed from one to another; that partition of joint Hindu family property was not 'transfer' in the strict sense; that there was no transfer of assets, direct or indirect, within the meaning of section 16(3)(a) (iii) or (iv) of the Income-tax Act to the respondents wife or minor son. It was also observed that the court is not entitled to say that for the purposes of taxation the actual transaction is to be disregarded as 'machinery' and that the substance or equivalent financial result are the relevant consideration.
Viewing these gifts from either aspect referred to above, there are no gifts to attract the provisions of the Gift-tax Act. In this view, we are satisfied that the Tribunal is justified in its conclusion.
Our answer to the question is, therefore, in the negative and against the department with costs. Advocates fee Rs. 250.
Question answered in the negative.